Have you ever wondered what your practice is worth or how you can make it more valuable? How to Value, Buy or Sell a Financial Advisory Practice by Mark Tibergien and Owen Dahl, both of Moss Adams, takes readers through the logic and legwork of coming to a true assessment of a financial services business. The authors certainly have credibility; Moss Adams has consulted with more than 1,000 financial services organizations on issues related to valuation, succession planning, practice management and, of course, M&A.
Tibergien and Dahl state that the book’s goal “is to explain how to examine each of the variables and each of the assumptions that can shape conclusions on valuation.” They also identify areas that owners can work on to enhance the value of an advisory business — a topic of interest to all financial planning executives, whether or not they plan to put out the “for sale” sign.
To Tibergien and Dahl, there are several key matters to consider when selling a business:
o Be clear on what your goals are.
o Build a history of the business by gathering relevant documents for the past three to five years.
o Benchmark your business against relevant industry standards to see how yours stacks up.
o When negative variances show up in your benchmarks, think about ways you can close these gaps to enhance value.
o Remember that valuation is more art than science — the firm’s numbers tell one story, but its potential tells another. Position your business so that you can improve cash flow, minimize risk and manage growth.
Likewise, the authors provide several considerations if you prepare to buy a practice:
o Value is a function of future potential, not past results.
o All firms are not created equal; therefore, rules of thumb are not always clear cut.
o Do your own due diligence; the seller’s facts are not always as they seem.